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KN15181 KEY NOTE CONFECTIONERY MARCH 2001

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This report covers: confectionery, chocolate, sugar, countlines, boxed chocolates, blocks, moulded chocolates, bite-size, novelty, seasonal products, fruit sweets, mints, chewing gum, traditional sweets, medicated confectionery, eating patterns, bubblegum,

Companies/brands covered include: Cadbury Schweppes, Trebor Bassett, Wuxi-Leaf, Dairy Milk, Roses, Easter Eggs, Nestle, Nestlé, Rowntree Mackintosh, KitKat, Black Magic, After Eights, Mars UK, Snickers, Bounty, Maltesers, Kraft Foods, Kraft Jacobs Suchard, Philip Morris, Terry's Orange, Toblerone, Nuttall's Mintoes, Callard & Bowser, The Wrigley Company, Extra, Orbit, Thorntons, Ferrero, Rocher, Kinder, Swizzels Matlow, Love Hearts, Refreshers, Leaf (UK), CSM, Chewits, Bendicks (Mayfair), August Storck,

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EXECUTIVE SUMMARY

The UK has one of the largest confectionery markets in the world, with per capita consumption currently estimated at 14 kilograms (kg) per person, per capita, per annum. Key Note estimates that the retail sales market was worth £5.68bn in 2000, having grown by 1.8 percent since 1999. Growth during the last few years has been less dramatic, as household expenditure on food has fallen. Furthermore, confectionery now faces increased competition for consumers’ disposable income from a variety of other items.

The largest market sector is chocolate confectionery. The other sector, sugar confectionery, encompasses a wider range of products and companies. The UK is not so well-developed in the area of sugar confectionery, particularly when compared with overseas markets such as the US and some European countries. However, it now seems that this sector will witness increased investment from the major players. One of the fastest-growing sectors is chewing gum, which now accounts for 6.1 percent of the total confectionery market.

The majority of confectionery is bought on impulse, from a variety of outlets. However, one feature of the market has been the growing influence of the multiple grocers, which have taken an increasing share due to multipack sales of items such as countlines. Confectionery is bought by the vast majority of UK consumers, although sales of certain items tend to be bought predominantly by females, especially within the chocolate sector. Children also comprise a major target market — data shows that confectionery purchases tend to rise if there are children in the household.

The market has been one of the main beneficiaries of the general rise in the spending power of children within the UK. The confectionery market is dominated by three large companies, all of which are active in overseas markets and have wide product portfolios. Cadbury Schweppes PLC, Nestlé Holdings (UK) PLC and Mars UK Ltd all own a number of well-established brands in the chocolate and sugar sectors (which account for a significant percentage of sales). Many of these brands have high advertising budgets and a number have been extended using limited edition flavours and new packaging formats. A comparatively small number of brands account for a relatively high level of confectionery sales. There are also a number of smaller companies in the industry, many of which target particular niche markets — such as premium confectionery.

Growth will be strongest in the sugar confectionery sector, which will steadily increase its share of the market. The chocolate sector is likely to benefit from the trend towards gift-giving and sharing among others, which will increase sales of items such as chocolate assortments. The major players are forecast to increase their global presence even further.

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TABLE OF CONTENTS

Executive Summary 1
1. Market Definition 2
REPORT COVERAGE 2
MARKET SECTORS 2
Chocolate Confectionery 2
Countlines 2
Boxed Chocolates 3
Blocks and Moulded Chocolate 3
Bite-Size Chocolate Items 3
Other Chocolate Confectionery 3
Sugar Confectionery 3
Fruit Sweets 3
Mints 3
Chewing Gum 3
Traditional Sweets 3
Medicated Confectionery 4
Other Sugar Confectionery 4
MARKET TRENDS 4
Eating Patterns 4
Table 1: Estimated Average Household Food Consumption (grams per person per week), 1998-2000 4
Consumer Spending 5
Continued Growth in Snacking 5
Functional Foods 6
MARKET POSITION 6
UK 6
Table 2: Consumer Expenditure on Confectionery Products as a Proportion of Total Food Expenditure (£m and percent), 1995-2000 7
Overseas 7
KEY TRADE ASSOCIATIONS 7
The Biscuit, Cake, Chocolate & Confectionery Alliance 7
British Confectioners Association 8
Retail Confectioners & Tobacconists Association Ltd 8
Wholesale Confectionery & Tobacco Alliance Ltd 8
International Cocoa Organization 8
2. Market Size 9
THE TOTAL MARKET 9
Table 3: The Total UK Confectionery Market by Value (£m at rsp), 1995-2000 10
MARKET SECTORS 10
Chocolate Confectionery 10
Countlines 11
Boxed Chocolates 11
Blocks and Moulded Chocolate 11
Bite-Size Chocolate Items 11
Other Chocolate Confectionery 12
Table 4: The UK Chocolate Confectionery Market by Sector by Value at Current Prices (£m at rsp and percent), 2000 12
Sugar Confectionery 12
Fruit Sweets 13
Mints 13
Chewing Gum 13
Traditional Sweets 13
Medicated Confectionery 14
Other Sugar Confectionery 14
Table 5: The UK Sugar Confectionery Market by Sector by Value at Current Prices (£m at rsp and percent), 2000 14
OVERSEAS TRADE 15
Exports and Imports 15
Table 6: Total Value of UK Imports and Exports of Confectionery (£m), 2000 15
Table 7: Major Export Markets Accounting for Chocolate and Sugar Confectionery Items ( percent), 1999 16
3. Industry Background 18
INTRODUCTION 18
Recent History 18
Number of Companies 18
Table 8: Number of VAT-Based Enterprises Engaged in the Manufacture of Chocolate and Sugar Confectionery by Turnover Size (£000), 2000 19
Employment 19
Table 9: Number of VAT-Based Local Units Engaged in the Manufacture of Chocolate and Sugar Confectionery by Employment Size (number of employees), 2000 20
REGIONAL VARIATIONS IN THE MARKETPLACE 20
DISTRIBUTION 20
Table 10: Total Confectionery Sales by Trade Sector ( percent share of market), 2000 21
HOW ROBUST IS THE MARKET? 22
LEGISLATION 22
4. Competitor Analysis 23
THE MARKETPLACE 23
Table 11: Manufacturers’ Shares of the UK Confectionery Market by Value ( percent), 2000 23
Table 12: Selected Leading UK Confectionery Companies by Turnover and Pre-Tax Profit (£m), 1999/2000 25
MARKET LEADERS 25
Cadbury Schweppes PLC 25
Nestlé Holdings (UK) PLC 27
Mars UK Ltd 28
Kraft Foods UK Ltd 29
The Wrigley Company Ltd 30
Thorntons PLC 31
Ferrero UK Ltd 32
Swizzels Matlow Ltd 32
Leaf (UK) Ltd 33
Bendicks (Mayfair) Ltd 33
OUTSIDE SUPPLIERS 34
Raw Materials 34
Food Processing Machinery 35
Packaging 35
ADVERTISING AND PROMOTION 36
Table 13: Main Media Advertising Expenditure on Confectionery by Sector (£000), Years to December 1999 and 2000 37
Exhibitions 37
The International Food and Drink Exhibition 37
The Convenience Retailing Show 38
5. Brand Strategy 39
INTRODUCTION 39
Chocolate Confectionery 40
Table 14: Leading Chocolate Confectionery Brands from Major Companies, 2000 40
Table 15: Top Ten Best-Selling UK Chocolate Confectionery Brands by Value (£m), 2000 41
Sugar Confectionery 41
Table 16: Leading Sugar Confectionery Brands from Major Companies, 2000 42
Table 17: Top Ten Best-Selling UK Sugar Confectionery Brands by Value (£m), 2000 43
BRAND PENETRATION 43
Table 18: Penetration of Leading Brands of Chocolate Bars/Assortments ( percent of adults), 2000 44
Table 19: Penetration of the Top Four Chocolate Bar Brands by Age and Social Grade ( percent of adults), 2000 45
Table 20: Penetration of Selected Chocolate Assortments by Age and Social Grade ( percent of adults), 2000 46
BRAND ACTIVITY 47
Cadbury Trebor Bassett 47
Nestlé Holdings (UK) PLC 47
Mars UK Ltd 49
Kraft Foods UK Ltd 50
The Wrigley Company Ltd 50
Ferrero UK Ltd 50
Swizzels Matlow Ltd 51
Leaf (UK) Ltd 51
Bendicks (Mayfair) Ltd 52
BRAND ADVERTISING 52
Table 21: Main Media Advertising Expenditure of Selected Companies on Confectionery (£000), Years to December 1999 and 2000 52
Table 22: Main Media Advertising Expenditure for Selected Confectionery Brands (£000), Year to December 2000 53
6. Strengths, Weaknesses, Opportunities and Threats 54
STRENGTHS 54
WEAKNESSES 54
OPPORTUNITIES 55
THREATS 55
7. Buying Behaviour 56
CONSUMER PENETRATION 56
Table 23: Purchasers of Confectionery ( percent of adults), 1997-2000 56
Purchases by Sex 57
Table 24: Purchasers of Confectionery by Sex ( percent of adults), 2000 58
Purchases by Age 58
Table 25: Purchasers of Confectionery by Age ( percent of adults), 2000 59
Purchases by Social Grade 59
Table 26: Purchasers of Confectionery by Social Grade ( percent of adults), 2000 60
Presence of Children 60
Table 27: Purchasers of Confectionery According to Presence of Children ( percent of adults), 2000 61
Spending Power of Children 61
8. Current Issues 62
CORPORATE DEVELOPMENTS 62
NOVELTY CONFECTIONERY 62
HEALTH AND DIET CONCERNS 63
EXPLOITATION IN THE COCOA PLANTATIONS 63
THE ROLE OF THE INTERNET 64
9. The Global Market 65
MARKET SIZE 65
MAJOR TRENDS 66
CONSUMER BEHAVIOUR 67
THE FUTURE 68
10. Forecasts 69
INTRODUCTION 69
FORECASTS 2001 TO 2005 69
Table 28: The Forecast UK Confectionery Market by Value at Current Prices (£m at rsp), 2001-2005 70
MARKET GROWTH 70
Figure 1: The Total UK Confectionery Market by Value at Current Prices (£m at rsp), 1995-2005 70
FUTURE MARKET DEVELOPMENTS 71
Demographic and Social Trends 71
Table 29: Age Profile of the UK Population (000), 1998, 2001 and 2006 71
THE GROCERY TRADE 72
BRAND DIVERSIFICATION 72
GLOBALISATION 72
10. Company Profiles 73
Cadbury Schweppes PLC 74
Kraft Foods UK Ltd 76
Mars UK Ltd 78
Nestlé Holdings (UK) PLC 80
The Wrigley Company Ltd 82
13. Company Financials 84
14. Further Sources 86
Associations 86
Periodicals 87
Directories 88
General Sources 89
Bonnier Information Sources 90
Government Publications 91
Other Sources 92
Understanding TGI Data 94
Number, Profile, Penetration 94
Social Grade 95
Standard Region 95
Key Note Research 96
The Key Note Range of Reports 97

Text © 2001 Key Note

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Last updated by Jacob van Eldik 19th January 2001